Nick Buckles, CEO of G4S, gives a good impression of being a tongue-tied bungler in his BBC radio interview today. But listen carefully - he was not even trying to explain why his company had thrown in the towel on Olympics security and forced the government to bring the army on. Here is a CEO talking straight to shareholders, explaining why, embarrassing though it might be, his behaviour maximises G4S profits.
When you go to media training, the first thing you’re told is “never answer the question”. Say what you want to say, not what you have been asked about. So the fun in listening to CEO’s like Buckles, trained like show-dogs to perfection, is to figure out what question they are asking and to whom they are addressing the answer. It is neither the hapless interviewer, in this case Justin Webb, nor we the average listener. Buckles was talking to his shareholders and explaining why, despite all appearances, he is indeed a business leader of some genius. Justin Webb and the Today editors made life easy for him by not noticing.
Broadly, the interview starts with Webb asking Buckles how he could possibly not have known until now that G4S would not be able to deliver on the security staff. A perfectly fair question. But Buckles spends a good 4 minutes answering a different question: how complicated - read, expensive - a task it turned out to be to recruit the staff. Webb asks why he hadn’t foreseen that, and Buckles says “the process of recruitment was complex, bringing down the pipeline from 110,000 to 10,000. We all had the same information …. we were fully transparent through that process … they [the government] knew that the process … had to be compressed over the last 7 or 8 weeks …. 100,000 people applied to join … it’s a complex operation to make that happen...”
Buckles hides behind this “process” to an extent entirely unbelievable for a Chief Executive. Webb never asks who was responsible for designing “the process”. Buckles wants to make us think that as long as rules were agreed in advance (“we had a process”) and the client was kept informed (“we all had the same information”), then his job is done. But what is the point of a highly paid Chief Executive if it is not to give up the rules when they’re going wrong? To be, in the trendy political parlance of the day, the Schmittian agent - the one who defines a state of exception, the moment when the process can be thrown overboard. Business is (mostly) run as micro-dictatorship with a leadership cult exactly for that reason. Webb never asks why the process was sacrosanct, nor who was responsible for it in the first place.
At this point, the interviewer and interviewee look equally artless. Buckles answers beside the point, without even an attempt to communicate; and Webb lets a few wide open goals slip by.
But actually, Buckles turns out to be a step ahead. He may be hiding behind this mythically invariant “process”, but the last section of the interview, when Buckles explains that he will make between £30m and £50m of loss on the overall contract, suddenly makes sense of his preamble.
Take a moment to understand what the numbers teach us. Say G4S will lose £30m because it has to pay for 10,000 squaddies over 17 days. Assume it would otherwise have broken even - its total cost per security guard per day, sourced from the army, is a miniscule £176. Say £120 goes on £10/hr for 12 hours a day. That leaves G4S with almost nothing for screening, payroll tax, profit and contribution to Buckles’ bonus … There seems no way that Buckles could have delivered his obligations for less, and that much he would have known a long time ago. So if he is going to make a loss even when paying quite so little for the squaddies, we can assume he would have made a massively greater loss if he’d had to run his very expensive process through to the end.
In other words, given these numbers, it is almost certain that G4S hugely underestimated the cost of delivering the security staff. What Buckles was explaining to his shareholders on the public airwaves this morning was that a £30m loss may be bad … but that, given the complexity and enormity of the process, it could have been much, much worse.
Now, therefore, we can hypothesise how the interview was planned from Buckles’ point of view. His communications team will have been focused on explaining to shareholders why this should be viewed as good leadership, and not as a catastrophic letting the (national) side down. G4S’s overall bid was too low - they had suffered the “winner’s curse” so common in public procurement processes, the situation in which the lowest bidder is simply the one who has been most wrong about the cost of provision.
Buckles had to manage that initial error, and simply refusing to do the work was the daring, high-stakes option the leader took. He knew that the security-agent-of-last-resort, the army, was always there to pick up the pieces, and that this would avoid all of the prohibitively expensive screening processes. (Note the similarity between we, the lenders of last resort to the banks, and we, the paymaster of the army, as security agent of last resort …. in both cases, it allows the company to take a risk that could pay off handsomely while knowing there is a social safety net for it).
Buckles could not call on the army’s help too soon - there would then have been time to ask G4S to do what they were contractually required to do. So, this morning, Buckles offered his shareholders all the information that they needed for them to know that they were, after all, in good Schmittian hands. 10/10 for the Chief Executive.
And is there a wider lesson to be learned for public procurement? The most important is that competitive tendering hardly ever works. If the bid is too low, the contract will default; if it is too high, the taxpayer gets fleeced. A return, anyone, to the notion that the public service might actually itself deliver, and not just commission?